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Gulf Coast Wants The RESTORE Act Passed Before A Potential BP Settlement

Posted: 02/17/2012 1:00 pm

This article was published in The Louisiana Weekly in the Feb. 13, 2012 edition.

Congressional delegates from Louisiana and other Gulf Coast states hope the bipartisan RESTORE Act will be passed soon and before a possible BP settlement with the feds so that BP fines go to coastal states and not Washington's coffers. The bill would dedicate at least 80 percent of Clean Water Act penalties for the BP spill to Gulf states. Under the CWA, the oil company could be fined over $17 billion for the number of barrels spilled from late April to mid-July 2010.

How and when federal penalties will be levied against BP is unclear. In one scenario, a settlement between BP and the U.S. Justice Dept. could be reached soon. But in another possibility, wrangling in a federal district court trial starting on Feb. 27 in New Orleans, with Judge Carl Barbier presiding, could drag on for months.

Last week, BP chief executive Robert Dudley said the company is preparing for its limitation and liability trial in New Orleans. When BP released its quarterly earnings on Feb. 7, he said "we are prepared to settle if we can do so on fair and reasonable terms." But he added, "if this is not possible, we are preparing vigorously for trial."

Last month, a European oil analyst at Morgan Stanley said BP is likely to settle out of court with the feds before the New Orleans trial begins.

In a media conference call from Washington, DC last Wednesday, Louisiana Sen. Mary Landrieu (D) said "local officials have been pounding the halls of Congress in recent days," discussing the RESTORE Act. She said the bill needs to be passed because otherwise, under the Oil Pollution Act, the penalty money will go into a general fund.

Landrieu said that "the bill is moving along pretty well," given the pace of Washington politics, and could be attached to a transportation bill or a payroll tax cut extension bill that Congress is considering. But she emphasized that "now is the time" for Congress to pass the RESTORE Act.

In last week's conference call, Louisiana Congressman Steve Scalise (R) , an original sponsor of the U.S. House version of the RESTORE bill, said time is of the essence, with the potential for a BP settlement on the horizon. "We want something done before a settlement is reached between BP and the federal government," he said.

Escambia County, Fla. Commissioner Grover Robinson, another participant in the conference call, said that the RESTORE Act was stalled in a climate of "spirited spite in Washington," and Congress must rise above its divisions. But he noted that 38 U.S. House sponsors and nine Senate sponsors support the act.

Scalise said the Congressional Budget Office's scoring or assessment of the RESTORE Act and its costs have been one of several obstacles to passing the legislation. In an Oct. 19 cost estimate, the CBO said both the size of the CWA penalties to be levied against BP and when they might be collected are uncertain. "It is possible that any penalty payments related to the Deepwater Horizon incident will be received by the government only after a lengthy, legal process that could take several years to resolve," the CBO said. "In that case, penalty collections could be delayed until after 2021."

But the CBO also said that penalties could be collected relatively quickly if a settlement with BP is reached. The CBO estimates that implementing the RESTORE Act and directing the revenue from fines to the Gulf's recovery would cost the federal government $1.2 billion between 2012 and 2021.
If BP does end up in federal district court this month, the trial could continue through the spring and summer. But litigation probably won't be as prolonged as the ten years it took Exxon's battle to reach the Supreme Court after the 1989 Valdez spill in Alaska.

Tulane environmental law professor Oliver Houck said "if the trial unfolds in full, I cannot imagine it taking less than months since there's so much fact and expert testimony from all sides. On the other hand, I don't see an issue here that would reach the Supreme Court because this is just admiralty and tort law writ large." He doubts the wrangling would go any further than the Fifth Circuit Court of Appeals.

Houck's bet would be on an early settlement between BP and the feds, either before or during the early stages of the New Orleans trial. But he added "these are some well-heeled and hard-nosed defendants, and a lot of prestige is on the line, so the obstacles to settlement are basically the allocation of responsibilities among them."

If a settlement is reached soon, then what? Martin Davies, director of the Tulane Maritime Law Center, doesn't see much point in passing the RESTORE Act if the federal government has settled with BP. "Passing the act in those circumstances would negate the effect of the settlement made by the executive branch--a tricky, little constitutional issue," he said.

Houck said passing the RESTORE Act after a BP settlement "may depend on whether the act, and or the settlement, go beyond simply allocating the monies."

As for the Gulf, serious problems remain nearly two years after the spill. Plaquemines Parish president Bill Nungesser, who was on the Washington conference call and pacing the halls of Congress last week, said "we still have oiled land, oil on the booms of our bayous, dead birds and dead turtles. If we have a hurricane, all this oil is going to wash up on the coast." He brought recent photos of the spill's impact on Plaquemines with him to Washington.

Nungesser said "we've seen shrimp with no eyes since the spill. We'll see the eggs affected. Alaska's Pacific herring population hasn't recovered from the Exxon Valdez spill, and the BP spill was ten times bigger." Shrimp reproduce and lay their eggs in the Gulf, and then move inshore to estuaries.

Meanwhile, London-based BP said last week it had a good 2011, and reported higher profits for the year's final quarter versus a year earlier. The company's full-year, underlying replacement-cost profit was $21.7 billion in 2011, against $20.5 billion in 2010. BP last week announced a 14 per cent increase in its quarterly dividend to 8 cents a share for fourth quarter 2011--the first hike since it resumed paying dividends a year ago.

In 2012, BP expects to operate with eight rigs in the Gulf of Mexico by year's end, versus five in the Gulf now, and hopes to pay a remaining, almost $5 billion into the $20 billion Gulf of Mexico Trust Fund. By late last year, BP had paid over $7.8 billion to meet claims and government payments associated with the spill. Meanwhile, the company has committed $1 billion for early restoration of natural resources in the Gulf since the spill and the first projects in that process, including two in Louisiana, were announced in December. Louisiana's projects will create marsh in Barataria Bay and develop oyster beds in six areas.

Last month, Martijn Rats, head of European oil research at investment bank Morgan Stanley, saw a 70 to 80 percent chance of a BP settlement soon, and estimated the company would pay between $20 billion and $25 billion against all federal claims, including possible criminal penalties. end